Category Archives: Research Report with IMF Expert ” Northern Ireland’s Income & Expenditure in a reunification scenario”

Research report with Senior economist at the German desk of the International Monetary Fund (IMF) during German reunification showing Northern Ireland has near balance budget in unification scenario

Northern Ireland’s Income and Expenditure in a Reunification Scenario

One of the key recommendations in the 2017 Joint Committee report was to ascertain the true level of income and expenditure for Northern Ireland. In 2018 I compiled a research report with Gunther Thumann, the Senior Economist at the German desk of the International Monetary Fund (IMF) during German reunification. Our report shows that Northern Ireland starts on a near balanced budget in a unification scenario. The full report can be accessed throught the link above.

IMF Cover Sheet.jpg

Executive Summary

The first ever report to look at the issues, policies and planning required for the peaceful unity of Ireland and her people by a committee of the Dáil or Seanad was written by Senator Mark Daly and adopted unanimously in 2017 by the Joint Oireachtas Committee on the Implementation of the Good Friday Agreement. This report was entitled ‘Brexit & the Future of Ireland Uniting Ireland & its People in Peace & Prosperity’.
One of the key recommendations of that report was to ascertain the true level of the income and expenditure for Northern Ireland.
There are few economists in the world with first-hand knowledge and experience of Reunification. Gunther Thumann is one such individual; he worked as a senior economist at the German desk of the International Monetary Fund at the time of German reunification. This provided him with the analytical understanding of the complex economic developments as they happened. In the second half of the 1990s, he had several opportunities to talk privately with Chancellor Helmut Kohl about his assessment of the politics of German Re-Unification.
On the 14th of June 2018 Senator Mark Daly proposed to a meeting of the Joint Committee on the implementation of the Good Friday Agreement that he and Gunther Thumann compile a report on the true income and expenditure of Northern Ireland in a reunification situation. They have compiled this research which also analyses Ireland’s place in the world in various global indexes and its performance since independence.
Senator Mark Daly worked with Gunther Thumann and together they have examined the information available. This information shows that, in fact, the current reported deficit for the Northern Ireland budget could come close to a balanced budget in a re-unification scenario. Today, people take German Unification for granted but, as Thumann observes, at the time in 1989/90 it was far from certain as to what the outcome would be as a result of the falling of the Berlin Wall.
“I am amazed how many Germans these days seem to take Re-Unification for granted. We should not forget that the developments that started in 1989 could have turned out very differently: Russian tanks might have intervened in October-November 1989; the German political leadership might have pursued a less rigorous solution; the Allied Powers might have opposed Re-Unification; frustration among east Germans (“progress too slow”) or west Germans (“costs too high”) might have gained the upper hand. But perhaps we should look at it differently: The fact that people take Re-Unification for granted reflects its success.”
For the purpose of this research, Thumann has given a brief which has been included in full at the end of this research as to the timeline of events in German Re-Unification. The outline of what could have happened and his conclusions and the lessons for Ireland in its unification process are also set out.
The core lesson for Ireland in its re-unification process is that the outcome is something that can only be achieved by hard work, careful planning and implementation. As John Bradley in his paper ‘Towards an All Island Economy’ presented at Queens University Belfast pointed out “The extreme importance of strategic economic planning…………….policy errors or policy neglect seldom goes unpunished”.
Congressman Brendan Boyle commissioned the United States Congressional Research Service to look at the income and expenditure for Northern Ireland. They produced a report entitled ‘Northern Ireland Budgetary Issues’. The United States Congressional Research Service report breaks down Northern Ireland’s expenditure into identifiable expenditure, non-identifiable expenditure and accounting adjustment.
Thumann and Daly have looked at the Congressional research report and make the point that included in identifiable expenditure in Northern Ireland 2012-13 Social Protection budget is pensions accounting for £2.8 billion. These would initially be the responsibility of the British Government as the pension liability was accrued while Northern Ireland was part of the United Kingdom.
Congressman Boyle’s report explains, non-identifiable expenditure of £2.9billion includes Defence Expenditure and UK Debt Interest. These would not be a liability of a new unified Ireland. Thumann explains that not all the accounting adjustments figure of £1.1billion would be applicable in a reunification scenario. Also the convergence of the public service numbers between the north and the south would bring a saving of £1.7billion per annum in the current budget expenditure of Northern Ireland.
Taking the above adjustments and savings into account the cumulative figure is £8.5 billion. With the reported deficit for Northern Ireland is at £9.2 billion therefore the current income and expenditure figure for Northern Ireland comes near a balanced budget in a reunification scenario. This is of course before taking into account the likely potential for growth in Northern Ireland following unification as happened in East Germany following its reunification and to eastern European countries on their accession to the EU.

 

Comments Off on Research report with Senior economist at the German desk of the International Monetary Fund (IMF) during German reunification showing Northern Ireland has near balance budget in unification scenario

Filed under Research Report with IMF Expert " Northern Ireland’s Income & Expenditure in a reunification scenario"